Munroe seeks funding boost with referendum

Saturday

Oct 27, 2012 at 10:17 PM

The Munroe Regional Medical Center tax referendum on the Nov. 6 ballot boils down to a simple question: Are voters willing to financially support the publicly owned hospital through property taxes for the next five years?

By Fred HiersStaff writer

The Munroe Regional Medical Center tax referendum on the Nov. 6 ballot boils down to a simple question: Are voters willing to financially support the publicly owned hospital through property taxes for the next five years?

If they are, the tax will buy the 421-bed, not-for-profit some time. The $65 million the tax will raise won't cure all the hospital's woes. But it will give the hospital an infusion of cash to help support some of its capital needs, pay off some debt, and provide time to hope the economy and health care picture improves.

If the tax referendum is defeated, the most likely alternative is leasing the hospital to an outside healthcare company for the next 40 years. In exchange, the Marion County Hospital District, which owns the hospital, would receive as much as $270 million and receive promises by the tenant to make at least $150 million worth of improvements that will keep the hospital competitive in the healthcare arena.

Both those who support the tax and those oppose it agree the hospital needs financial help. The disagreement is how to get there.

Also at issue: Whether the hospital district's lease with new tenants could be strong enough to ensure the hospital keeps offering services important to the community, regardless of whether those services are profitable.

Stan Hanson, chairman of the Protect Hometown Healthcare, said some of the rush to consider leasing the hospital is being driven by fear of the sluggish economy and the tough economic position in which it leaves Munroe.

“People shouldn't jump the gun on this,” Hanson said, citing the hospital's 115-year history. “We've had some ups and downs.”

“I would not let this one bad economy that we're now coming out of influence the decision on Munroe,” Hanson said.

The problem with leasing the hospital is that it gives up control of the facility, and that could mean services important to the county getting eliminated, he warned.

Supporters of a lease to an outside company say that such a lease could outline what services have to remain, but Hanson said he wouldn't have much faith in such a deal.

“I don't think we'd be able to negotiate a contract (with those specifications),” he said. And even if the Hospital District could, such a deal wouldn't be enforceable, he said.

Once the new tenants move in and make changes to the hospital's computer systems and payroll, it will be too difficult logistically to end the lease.

“We've had a successful relationship with the way it's set up now,” Hanson said. “It just needs a loan from the owners (the public) before making drastic changes.”

Munroe is owned by the state-sanctioned Marion County Hospital District and is overseen by seven trustees who are appointed by the County Commission. The trustees currently lease the hospital to Munroe Regional Health System Inc., which is overseen by a 13-member board, some of whose members also are district trustees.

The referendum is for a 1 millage point increase in property taxes for an estimated five years. The additional mill would costs a homeowner whose house is valued at $100,000, with a $50,000 homestead exemption, about $50 annually.

The tax proceeds would back a $65 million bond issue.

Private consultants told hospital officials that the facility needed $150 million worth of improvements to remain competitive. Some of those improvements included a new emergency center and patient wing.

Currently, the public hospital remains financially sound, but Munroe representatives say its financial picture is steadily eroding and they predict that within a few years, the institution will begin to operate in the red.

Hanson, who is a former Munroe Regional Medical Center board of directors member, said the hospital may no longer need that much improvement.

“The whole thing is speculative,” Hanson said.

The best thing to do is approve the tax and in five years look for “some limited affiliation” with another hospital or healthcare group, Hanson said.

“We are not going to go down the tubes in five years,” he said.

Citing critics who say $65 million won't make a difference for the hospital, Hanson said voters should give it a chance before handing control over to a healthcare company made up of people who don't live here.

Hospital District trustee Joe Hanratty said talk of losing hospital control and trying to buy the hospital more time while the economy turns around is a waste. If Obamacare stays in place, Hanratty said, Munroe will lose money because of it.

“The main advantage (of leasing to an outside company) is because Munroe — as a single site, not-for-profit hospital — is not equipped to deal with the financial structure of medical costs today …” he said.

The underlying problem is the hospital's payer mix. Munroe has an inordinately high number of patients dependent on low-paying Medicaid or no health insurance at all.

In fact, Munroe has the sixth highest combined Medicare/Medicaid revenue as a percentage of total revenue amongst hospitals in the nation rated by Moody's.

“You have to align yourself with a health care company that is able to balance out the best payer mix with the best payer mix from somewhere else,” he said.

Munroe still has profitable health care programs that make it a financially attractive investment for outside companies. But without that help, Munroe will continue to financially deteriorate, he said.

Hanratty said it's no use pretending the warning that the hospital needs a $150 investment is speculative.

“If you vote for the tax you're putting that off for another three, four years, if we survive that long. The hospital is never going to operate profitably as a single-site hospital. It's always going to need tax support,” he said.

Hanratty said the hospital is already suffering “financial failure.” That can be seen by the hospital being unable to implement its $150 million master facilities improvement plan and having to dip into its Wall Street investment revenues to make ends meet.

“That's your warning signs. It's time to go,” he said.

As for control of the hospital, Hanratty said the trustees would remain Munroe's landlords and, through its lease, dictate how it's operated.

He said it's unlikely a health care company would invest hundreds of millions of dollars only to immediately violate the lease and head to court.

If the tax referendum fails and trustees continue looking at the lease option, here are possible candidates:

Duke LifePoint Healthcare, a joint venture of Duke University Health System and LifePoint Hospitals, is offering $375 million for a 40-year lease. Some trustees say this group appears to be most compatible with Munroe.

A Health Management Associates/Shands HealthCare partnership is offering between $440.2 million and $500.2 million. HMA owns or leases 70 hospitals nationwide and has affiliations with 32 hospitals in Florida, including some in the Shands group.

The third finalist, Community Health Systems, recently withdrew. It had offered $406 million to lease Munroe and already owned or leased 135 health care facilities in 29 states, including two in Florida.

The remaining two companies say they would not drop unprofitable, but important, medical services currently offered by Munroe.

Meanwhile, two major group have emerged trying to convince voters on the referendum issue. They are Protect Hometown Healthcare, which has raised more than $200,000 thus far for its campaign; and Save Our Constitution Now, which had raised only $100 before Oct. 12, which was the latest reporting cycle.

Save Our Constitution Now has funded several radio and mailing ads, as well as robo calls, against the tax. The group is headed by former Florida House speaker Tom Feeney and affiliated with Associated Industries of Florida in Tallahassee. Its next financial report is due Nov. 2.

Much of Protect Hometown Healthcare's funding has come from local health care facilities and area physicians.